President Barack Obama announced Thursday that the U.S. will cancel planned joint exercises with the Egyptian military after yesterday’s crackdown against pro-Muslim Brotherhood protesters killed more than 500. But Obama stopped short of curtailing the $1.55 billion in largely military aid Washington sends to Cairo annually.

Speaking from the driveway of his rented vacation home on Martha’s Vineyard Obama condemned the violence. “The United States strongly condemns the steps that have been taken by Egypt’s interim government and security forces,” he said. “We deplore violence against civilians.”

But Obama warned the Egyptian military — which has effectively run the country since it deposed President Mohammed Morsi in July — and the interim civilian government that further violence could affect American aid payments.

American and Egyptian military units were scheduled to participate next month in Operation Bright Star next month, a bi-annual joint exercise. (Read TIME’s Mark Thompson on Bright Star.) But in condemning yesterday’s crackdown and Egypt’s state of emergency, Obama said it would not take place.

Obama also stressed that the U.S. has not and will not choose sides in the ongoing turmoil. While both sides in the conflict may look to blame the West, Obama said, “we don’t take sides.” He added that “American cannot determine the future of Egypt.” Obama said that America’s values and interests both argued for a peaceful, stable and prosperous Egypt.

Though he called for an end to political imprisonment–an implicit call for Morsi’s release from weeks of detention–and an end to the country’s martial law, Obama said the Egyptian people will have to sort out their political future by themselves. Many analysts say America’s influence in Egypt is limited anyway. Washington’s $1.3 billion in military aid maintains military-to-military contacts that have long been a bulwark of U.S.-Egyptian relations. But Arab states like Saudi Arabia and the United Arab Emirates have recently pumped billions more into Egypt’s economy and enjoy fast-rising influence.

“The Egyptian people deserve better than what we’ve seen,” Obama added, while offering condolences to the victims and their families.